Tanking the Economy for $800, Please, Alex

by folkbum

As you have probably heard, the Republicans (from states that have a heavy presence of Japanese and German car manufacturers, no less) in the Senate have blocked a GM bailout. This sank the US stock market yesterday and global stock markets this morning. Good job, boys!

They blocked the bailout legislation (literally 2% the size of the $700 billion bailout handed to the financial companies two months ago) for one basic reason: Not because the bailout is bad economics, not because the bailout isn't really necessary, not because the bailout was too big or too small. It was because the bailout didn't kill the union:

The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.

After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.

Union-killing is a severe Republican fetish; it's among the strongest knee-jerk reactions they have to anything. The right of workers to band together collectively for their own common good is anathema to them; the right of corporations to screw their workers at will is sacred. How this is rational or healthy I just do not understand.

And, somehow, they have it in their head that the unions are what's dragging down American automakers. That's bogus:

Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

Got that? The Republicans are blaming the union and the $800 per car for the financial woes of the Big Three. It shouldn't be that much of a surprise, I guess, as these guys are dumb enough, it seems, to believe that poor, inner-city African Americans buying houses under the Community Reinvestment Act somehow had the collective ability to sink the multi-trillion international credit market--despite the facts.

Face it, $800 per car is less than $20 a month on a car payment, barely a blip in the price of that $26,000 Hummer or $24,000 Impala (GM's best-selling sedan). It is not why GM or Ford or Chrysler can't move cars right now, and not why they have lost market share in the last two decades. John Cole, in the world's shortest three-act play, explains just how dumb it really is to think that. Forcing the UAW to take cuts over and above what they themselves have volunteered is not going to magically turn the US auto industry into a lean competitor; it will, instead, put even more Americans in line for medicare and other government assistance as the government butts in to disrupt the right of workers to bargain with their employers.

This is all prequel to the big fight in a couple of months over the Employee Free Choice Act, which anti-union Republicans will go to the mat hard over. More locally, the Wisconsin legislature might consider finally repealing the Qualified Economic Offer, the law that makes us teachers the only employees in the state (perhaps in the country) whose growth in compensation is limited by law. Local righties are already off and running blaming the teachers union for the end of the world if the QEO is repealed. (Visit the archives for a more thorough discussion of the QEO.)

I do not understand the anti-union fervor, and I likely never will. But let me draw a parallel. After Rod Blagojevich was frog-marched to jail this week, local libertarian Nick Schweitzer offered a post explaining, as he put it, that the Blago mess should "serve as a reminder to all those who seek to increase the scope of government influence in our lives, that this is what it leads to. Government takes our money from us... money that we would have directed to good economic use, and redirects it to places where there is political influence. The more money [we] give government, ostensibly for the purpose of the "common good", the more chance there is for political corruption to take hold in order to control that money."

The defense against an out-of-control government is easy and well understood, and that is to organize against it. Conservatives and Republicans (and even libertarians like Nick, though I don't remember him commenting on the specific case I will cite in a moment) are all about the rights of individuals to come together to work for common goal influencing elections and government. One Wisconsin group even went all the way to US Supreme Court this year to protect their right to organize and work collectively against the government.

The same complaints Nick has about government concentrating wealth and power into the hands of the few can be made about corporations, too. In deciding how much to pay workers, management can redirect the capital and line the pockets of the already-powerful. CEO pay has skyrocketed compared to the wages of the average worker, which have stagnated or fallen after inflation. All those years recently when we've been told the economy is growing, the growth has been at the top, with the upper tenth of the income bracket seeing huge gains while the rest of us treaded water. The remedy is the same as the remedy against government abuse of power--the right of the people affected to organize as labor against capital, to demand their fair share of the pie, to take the money that they have earned for the company and keep more of it for themselves.

For $800 per car, Republicans are willing to sink the economy in service to ideology. They are willing to protect the moneyed few against the rest of us by blocking the EFCA. They are out to limit the only way average Americans have to protect against and prevent the abuse of power in the private sector, consequences be damned. It's all about breaking the unions.